Parts and Service Business Remains Strong in Q2

The outlook for dealership parts and service business is strong because fixed-ops results for the second quarter were good – except for slowdowns related to the CDK cyberattack at the tail end of the quarter.

“Our parts and service gross profit going into June was pacing at 8% year-over-year before ending the quarter at 4%,” says Dan Clara, senior vice president, operations, Asbury Automotive Group.

On a consolidated basis, Asbury’s parts and service revenue was a record $580.9 million for the second quarter, a 10% increase vs. a year ago. On a same-store basis, Duluth, GA-based Asbury parts and service revenue was $510.8 million, down 1.9% for the quarter.

As a group, the six big, publicly traded new-car chains reported $4 billion in service and parts revenue in the second quarter — almost but not quite flat compared to the same quarter a year ago, down 0.6%. For the first half of 2024, the group’s total service and parts revenue was $8 billion, up 1.9%.

Sonic Automotive, Charlotte, NC, reports second-quarter revenue for parts, service and collision repair for its franchised dealer segment of $434.3 million, an increase of 1% compared to a year ago.

 Sonic Automotive says its second-quarter overall corporate pretax income, not just for parts and service, took a $30 million hit related to the CDK disruption. That includes about $11.6 million paid to dealership employees on commission, whose potential earnings fell due to the CDK outage.

Sonic chairman and CEO David Smith says that even though most CDK functions were restored by the end of June, some related problems persisted.

“We continued to experience operational disruptions throughout July related to the functionality of certain CDK customer lead applications, inventory management applications and related third-party applications integrations with CDK,” he says.

“Prior to the CDK outage, we were tracking to have another great quarter of operating performance and financial results, and I’m confident that our team will continue to execute at a high level moving forward,” Smith says.

Of the publicly traded dealership groups, Penske Automotive Group, Bloomfield Hills, MI, appears to have experienced the least impact from the CDK outage. Chair and CEO Roger Penske explains the group’s U.S. auto operations aren’t linked to CDK.

More typical is Asbury Automotive's experience. David Hult, president and CEO, says the 12-day CDK shutdown created a backlog of “almost 100,000” repair orders that had to be entered by hand.

At Asbury, the exception to the rule was stores acquired from Koons Automotive Cos., the largest new-car retailer in the Baltimore-Washington region, because they’re on a different dealer management system. In December 2023, Asbury purchased 20 new-vehicle dealerships, six collision centers and associated assets from Koons Automotive for $1.5 billion.

Lithia Motors president and CEO Bryan DeBoer says that during the CDK shutdown, it was hard to keep car buyers from defecting to dealerships that weren’t affected.

DeBoer says in the call, “You have to remember this – even though CDK had this event, 55% of the industry wasn’t on CDK in the United States.”